New Delhi | Jun 24: Tata Sponge Iron today said it has received a Letter of Intent (LoI) from Eastern Coalfields as the successful bidder for award of 24,000 tonnes per annum of coal.

"The company is in receipt of LOI from Eastern Coalfields, a subsidiary of Coal India Ltd, declaring the company as a successful bidder for award of 24,000 TPA of coal at a notified price (winning premium is zero)."

The notified price shall be reviewed by Coal India on a half yearly basis, it added.

"As per the said LOI, the company would be required to execute the Fuel Supply Agreement, valid for a period of 5 years from date of execution to the agreement and is further extendable for another 5 years. The said agreement shall have a lock-in period of 2 years," the filing said.

This tonnage constitutes less than 10 percent of the company's annual coal requirement.

Tata Sponge is a coal-based merchant sponge iron producer and operates three rotary kilns with an installed capacity of 3,90,000 tonnes per annum (TPA) to produce sponge iron.

According to its annual report, the firm used coal worth about Rs 229 crore in 2014-15 against around Rs 263 crore in 2013-14.

Iron ore and coal alone constitute more than 80 per cent of the cost of production.

During 2014-15, the firm sourced almost all of its iron ore requirement from Tata Steel. It sourced half of its coal requirement from auctions of CIL while the other half was imported.